Brand valuation – examining the role of
marketing on firm financial performance
B. Rajesh Kumar, K.S. Sujit and Waheed Kareem Abdul
B. Rajesh Kumar, K.S. Sujit
and Waheed Kareem Abdul
are all based at the Institute
of Management Technology,
Dubai, UAE.
Received 27 January 2019
Revised 26 May 2019
24 September 2019
Accepted 7 October 2019
Erratum: It has come to the
attention of the publisher that
the article Kumar, B., Sujit, K.
and Kareem Abdul, W. (2019),
“Brand valuation – examining
the role of marketing on firm
financial performance”,
published in Measuring
Business Excellence, the
affiliations for all authors was
previously incorrect. The
correct affiliation should be
Institute of Management
Technology, Dubai, UAE. The
publisher sincerely apologises
for these errors and for any
inconvenience caused.
PAGE 90 j MEASURING BUSINESS EXCELLENCE j VOL. 24 NO. 1 2020, pp. 90-113, © Emerald Publishing Limited, ISSN 1368-3047
Abstract
Purpose – The purpose of this study is to broadly examine the role of marketing–finance interface factors
for value creation. Specifically, the study investigates the influence of discretionary expenditures such as
advertisement on valuation of brands and firms within the framework of risk factors.
Design/methodology/approach – To test the model and hypotheses of this study as it has the
possibilities of multiple causations among different variables used in the system. Some independent
variables are not truly independent and there is a possibility of biased estimation and inconsistent results.
Hence a dynamic simultaneous equation model is used including the instrumental variable approach.
Findings – The study provides evidence for direct association between brand value and firm value which
is represented by the joint impact of both operating and stock market performance. The results establish
the direct relationship between brand and firm value and signify the relevance of intangible value
creation.
Originality/value – This study addresses the gap in the research which examines the role of marketing
decisions on value creation which jointly impacts both operating and stock market performance.
Keywords Risk, Brand value, Market value, Operating performance, Advertisement expenditure
Paper type Research paper
1. Introduction
Shareholder value analysis (SVA) is increasingly becoming a new benchmark for judging
managerial action. The modern trend is that every investment whether in the area of
operations, human resources or marketing may now need to be justified from the
perspective of SVA. The wealth created by a firm is measured by its market capitalization.
Marketing function affects business performance in both tangible and intangible ways.
Intangible assets such as brands, technology, customer loyalty, human resources and
employee satisfaction are major contributors to company’s value and stockholder’s wealth.
Investments in marketing assets such as brand building lead to value creation for firms
through stock returns and financial performance. The intangible asset of brand value is
derived from discounting the future premium the consumers are willing to pay for a product
with a recognizable brand. Marketing literature has focused upon examination of the
relationship between brand value, firm performance and stock returns. There are two
perspectives with respect to the importance of brand value in marketing literature. One
perspective is based on the consumers’ point of view of brand equity whereas the
other perspective focuses on the stock market reaction to brand value. It can be
emphasized that brand is a corporate asset with economic value which creates wealth for
shareholders. This research focuses on the financial performance of brands which reflects
both operating and stock market performance.
Basically marketing and finance functions have different objectives and the focus is on
different stakeholders. At a superficial level, there seems to be little linkage between
marketing and finance functions of a firm. The main objective of marketers is to maximize
DOI 10.1108/MBE-01-2019-0007
sales through focus on customers, products and distributors. Metrics such as
advertisement awareness or brand value measurements are often used as key performance
indicators (KPI) in the marketing department as the immediate impact of sales on
performance is difficult to observe.
Finance department also focuses on sales growth. But finance managers are more
concerned about maintaining the financial health of the company. Finance function strives
for a sustainable level of financial resources which includes both external and internal funds
for short- and long-term profitable investment goals. Brands can be a strong signal for the
credit worthiness of a firm.
The monitoring and controlling systems of marketing and finance decision are different on
account of different decision variables and objectives. This results in two systems of KPIs
which are managed separately for marketing and finance functions. Managers in the
marketing and finance department must understand the interconnectivity among their KPIs
and objectives to avoid suboptimal decision-making process. For example, finance
managers must evaluate the potential dangers of reducing brand expenditures in the
context of liquidity crisis as it would have future cash flows.
In real sense, marketing and finance objectives and KPIs are closely connected as both
functions share the common goal of value maximization. There must be optimal interaction
of financial and marketing metrics for value creation. Intangible assets such as brands,
research and development (R&D) and advertising contributes toward enhanced
performance of assets. Creation of intangible assets such as brands is perceived to
improve stock holder wealth creation. The largest firms measured by market capitalization
and revenues are often companies with strong brands. Value relevance of marketing
decisions is of much significance especially in the context of the need of justification of
marketing expenses such as advertising. High-technology firms emphasize on brand
building initiatives for creation of assets which generate long-term profits. Technology
intensive companies such as Intel, Oracle, Cisco Systems and Sun Microsystems have
invested in significant brand-building initiatives. Strong brands have value potential as it
directly contributes toward revenue and cash flow generation for firms. Brand leads to
greater loyalty from customers and improved performance. Marketing assets contribute to
wealth creation in terms of stock returns.
Broadly, the study aims to explore the linkage between marketing and financing factors.
This research examines how advertisement improves brand value which in turn impact risk
and ultimately improves the operating performance leading to value creation for firms. Our
emphasis is on brand building activities and their contribution to the financial health of the
firm. Intangible assets are important determinants of firm value. An emerging research
stream on the interface between finance and marketing documents, evidence for the value
relevance of marketing metrics.
Current studies on impact of marketing actions on value creation have focused on variables
such as stock returns (Joshi and Hanssens, 2010; Bharadwaj et al., 2011) and market
capitalization (Barth et al., 1998). There exists a gap in studies which examine the role of
marketing decisions on value creation which jointly impacts both operating and stock
market performance. We examine value creation for firms by choosing a representative
variable which signify joint impact on both operating and stock market performance. The
valuation variable of enterprise value to sales represents both operating and market
performance of the firm. Wealth creation for firms is the product of operating and stock
market performance. Ideally enterprise value multiple is the variable which signifies both
operating and stock market performance. The paper is based on the assumption that
marketing actions must lead to tangible outcomes such as improvement in operating
performance and intangible outcomes such as improved stock market performance. Prior
studies use stock market performance only as proxy for wealth creation. This research

VOL. 24 NO. 1 2020 j MEASURING BUSINESS EXCELLENCE j PAGE 91

 paper focuses on the integrative variable representing both operating and stock market
performance.

2. Review of literature
Recent research trends in the area are presented in Table I. Advertising intensity and brand
equity from customer perspective are KPIs in marketing perspective (Hanssens et al.,
2014). Marketing variables contribute toward value creation in firms (Edeling and Fischer,
2014; Srinivasan and Hanssens, 2009). Research studies on the influence of leverage on
value have documented mixed results. Bradley et al. (1984) suggests that firms with volatile
earnings and high discretionary spending such as advertisement and R&D have low
financial leverage ratios. Firms with higher R&D and advertising tend to have higher agency
costs as the assets are intangible (brands and patents) and hence difficult to liquidate.
Such firms tend to have lower debt ratio.
The general academic view in the 1970s was that the optimal capital structure results
because of the tradeoff between the tax benefit of debt and present value of bankruptcy
costs. The optimal capital structure for firms can be estimated by examining the tradeoff
between the tax benefits of debt and leverage costs such as bankruptcy costs, agency
costs of debt and loss of non-debt tax shields (De Angelo and Masulis, 1980; Kim, 1979;
Modigliani, 1982). Event studies such as that of Chaney et al. (1991) have examined the
wealth creation for stocks in the context of corporate events involving brands such as new
product announcement. Simon and Sullivan (1993) derive brand value through market value
of a firm. Firm value can be categorized as tangible and intangible (Simon and Sullivan,
1993). Fosu et al. (2016) investigate determinants of corporate capital structure through
meta regression analysis based on a data set of 3,890 reported results collected from 100
primary studies. The study finds that tangible assets, market to book ratio and profitability
are significant determinants of corporate debt level.
The American Marketing Association characterizes a brand as “a name, term, sign, symbol
or design or a combination of them which is intended to identify the goods or services of
one seller or group of sellers.” Brands are promises that consumers believe in[1]. Basically
there are 12 different kinds of definition of brand in the literature based on the responses of
senior consultants in advertising agencies[2]. Brands can act as risk reducers by giving
consumers confidence about quality. Brands evolve in response to corporate actions,
marketing campaigns, consumer experience with products and changing consumer
preferences. The most important job for a marketer is to establish and strengthen brands for

Table I Recent empirical research on impact of advertising/brand equity on value measures

Study Marketing metrics Value metrics Results

Balachander and Brand equity Profits High quality brands are likely to yield higher profits by offering limited
Stock (2009) edition products
Bharadwaj et al. Brand equity Market value Brand equity enhances shareholder wealth
(2011)
Johansson et al. Brand equity Market value Brand equity shows a significant incremental effect on stock performance
(2012)
Joshi and Advertising Market value Advertising spending has a positive, long-term impact on firm market value
Hanssens (2010)
Mizik (2014) Brand equity Market value Brand equity as measured by customer mindset metrics, positively affects
current financial performance
Osinga et al. (2011) Advertising Stock returns Advertising have moderate effect on stock returns
Malshe and Advertising and Market value Positive relationship between advertising/brand equity and market
Agarwal (2015) brand equity capitalization
Chehab et al. Brand equity Market value Brand values and market capitalization are positively related
(2016)

PAGE 92 j MEASURING BUSINESS EXCELLENCE j VOL. 24 NO. 1 2020

companies and products. Brands are the mirror through which public perceptions are
formed with respect to marketer, company, its products, services and marketing
communications. In other words, branding is the central concept of marketing which does
affects everything the company says, does and sells. Brands add value to a company or
product. Brand also acts as trademarks. An effective brand will surely convey a message to
its target audience.
Brand equity is considered as an intangible corporate asset. Marketers use the term brand
equity to describe the value of a brand to its firm (Keller, 2003). Any value added to the
product solely by its brand name is “brand equity.” Brand equity has linkage to the brand’s
name and symbol and provides value to both the customer and firm (Keller, 2002). Brands
and brand equity are market-based assets and sources of competitive advantage
(Bharadwaj et al., 1993). The five major key brand equity assets which provide the source of
value for a firm are brand loyalty, brand name awareness, brand quality, brand image and
other proprietary brand assets such as specialized distribution channels, trademarks or
copyrights (Aaker, 1992). Brand equity also includes behavioral loyalty and attitudinal
loyalty (Arjun and Morris, 2001). Brand equity can be measured from the perspective of
customer mindset, product market outcomes (Ailawadi et al., 2003) and financial market
outcomes (Wang et al., 2009; Kapareliotis and Panopoulos, 2010). The financial market
outcome is the most powerful indicator of success of brand equity investments. Brand
equity can be defined as an “intrapersonal perceptual construct referring to the ability of a
brand to meet its promise of benefits termed as brand strength” (Ragggio and Leone,
2007). A survey by Fortune magazine suggests that often 40-75 per cent of a company’s
intangible assets may be attributed to brands[3]. The benefits of brand equity include
greater loyalty, less vulnerability to crises, larger profit margins, inelastic demand,
increased marketing communication effectiveness, licensing opportunities and brand
extension opportunities (Keller, 2002). Positive brand equity strengthens the competitive
advantage of the firm (Srivastava et al., 1998). Positive brand equity creates a strong brand
in the form of economically valuable asset which creates shareholder wealth (Kerin and
Sethuraman, 1998).
Brand equity is based on the consumer’s perspective while brand value evolves from
investor’s perspective (Lee, 2012). From consumer angle, brand equity asset elements
consist of awareness, image, attitudes, perceptions and knowledge. From investor
perspective, brand equity is a financial asset which reflects its future potential along with the
current value of brand (Morgan, 2012). Marketing metrics such as advertising awareness or
customer-based brand equity are often used as KPIs in the marketing department
(Hanssens et al., 2014).
Higher investment in advertisement is essential to enhance the perceived quality of brand
(Mitra and Golder, 2006). Discretionary expenditures such as R&D and advertising have
positive impact on firm value (Erickson and Jacobson, 1992). Advertising can act as a
signal of competitive viability of a firm. Advertising expenditures have a positive impact on
firm’s market value (Simpson, 2008). There exists positive relationship between advertising/
brand equity and market value of firm (Aaker and Jacobson, 2001; Barth et al., 1998;
Malshe and Agarwal, 2015). Advertising increases customer based-brand equity (Fischer
and Himme, 2017).

2.1 Determinants of value creation

The choice of debt level is a signal of firm quality (Myers, 1977). Bhandari (1988) finds that
leverage and average returns are positively related. Size proxied by market capitalization is
an important determinant of average returns (Banz, 1981). The major determinants of value
creation are profitability, growth rate, operating profit margin, capital investments, cost of
capital and growth (Rappaport, 1986, 1987). Profitability and growth are determinants of
value creation and Tobin’s q ratio is a significant measure of value creation (Varaiya, 1987).

VOL. 24 NO. 1 2020 j MEASURING BUSINESS EXCELLENCE j PAGE 93

 Yang et al. (2010) using structural equation model find that the primary determinants of
stock returns are leverage, expected growth, profitability, value and liquidity. Enterprise
value multiple is a strong determinant of stock returns (Loughran and Wellman, 2011). Serra
and Roy (2014) find that industry-level determinants of returns are unlevered beta, sales
growth and regulated tariff, and firm-level determinants are size, illiquidity and book to
market ratio. Leverage has a negative effect on firm value (Fosu et al., 2016). Bhaskaran
and Sujit (2016) find that dividend policy and cost efficiency are important determinants of
valuation of oil companies.

2.2 Determinants of brand value

The determinants of brand value are stock market returns, size measured by market share,
discretionary spending such as advertisement and profitability measures such as operating
margin (Barth et al., 1998). Aaker and Jacobson (2001) find that changes in potential
consumer’s attitude toward brand affects stock return and financial performance in high-
technology markets. Brands attract customer loyalty, higher-profit margins, marketing
communication effectiveness and serves as a defense mechanism to marketing crises
(Keller, 1997). Brand value is found to have significant positive relationship with stock
returns, advertisement expenditures, size proxied by market share and profitability
measures such as operating margin (Mary et al., 1998). Yeung and Ramasamy (2016) find
empirical evidence for the association between brand value and firm performance. Using
efficient markets hypothesis, Kirk et al. (2013) have established that the brand valuation
estimates are associated with share prices, book value and earnings. Many studies have
found evidence for the positive influence of advertisement intensity on brand and market
value of firms (Aaker and Jacobson, 2001; Barth et al., 1998; Malshe and Agarwal, 2015).
Advertising and brand equity lowers the beta of a firm (Johansson et al., 2012; McAlister
et al., 2007). Advertisement and brand equity investments facilitate reduction of cost of debt
(Rego et al., 2009; Singh et al., 2005). Some studies establish a feedback loop which links
stock market and financial constructs to marketing constructs (Joshi and Hanssens, 2010;
Fischer and Himme, 2017). Keller and Lehmann (2006) suggest that the magnitude of
advertisement expenditure is a major determinant of brand equity. Strong brands through
market efficiency tend to reduce marketing costs and generate higher cash flows through
price and volume premiums (Srivastava et al., 1998). Intangible assets such as brands
constitute significant part of the market value of firms (Bahadir et al., 2008).
The study by Fischer and Himme (2017) using a simultaneous equation model find
evidence for the positive impact of advertising spending on customer-based brand equity
and how brand equity impacts financial leverage and credit spread. The final effect would
be increase in the level of financial assets. The study by Fischer and Himme (2017) also
estimate sensitivities for the effects of advertising and brand equity on cost of capital.

3. Hypotheses
3.1 Hypothesis 1
Advertising is an important contributor to brand equity which creates or enhances brand
image and differentiates a firm’s offering (Keller and Lehmann, 2006; Mizik and Jacobson,
2008). Marketing initiatives ought to focus on increasing brand awareness and create
strong brand associations. Advertising can make positive brand evaluations and attitudes
which will be reflected in memory (Keller, 1993). Advertisement in various forms serves as a
signal of future earnings. Marketing actions such as promotions and advertising are more
effective for higher-quality brands.
H1. Advertisement expenditures have positive influence on brand value equity.

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3.2 Hypothesis 2
Intangibles are major contributors to firm’s value and stockholder’s wealth. Brand value is
the valuation of a product’s ability to sell at a premium without an increased benefits or
quality when compared to competitors. Companies such as BMW would be able to charge
a higher price for their vehicles. Firms with increased brand equity yields higher profit
margin and enhances valuation effects of the firm in stock market. Firms with strong brand
value benefit from competitive advantage that yields higher-profit margin (Aaker, 1991). As
brand value increases, brands have a greater likelihood of being purchased and
repurchased as it signals an increase in brand’s credibility and reduces customers’
perceived risk and information costs (Erdem et al., 2006). The enhanced impact on
purchases and repurchases will lead to greater future cash flows. Moreover, consumers will
be willing to pay premium prices for high-quality brands (Sullivan, 1998; Dube et al., 2008).
Brand value equity which is created through marketing activity and directed toward
customers can also impact investment behavior. Investors favor stocks with strong brand
names (Frieder and Subrahmanyam, 2005). It is observed that brand awareness and
perceived quality in consumer products may spill over to the demand for such stocks.
Studies have documented positive stock market reaction to brand value (Hsu et al., 2013;
Madden et al., 2006; Yeung and Ramasamy, 2008; O’Sullivan et al., 2009). The positive
relationship between brand equity and share prices suggests that investors recognize the
positive effects. These positive effects can be attributed to reputation as investors tend to
prefer well-known brands with high advertisement intensity (Joshi and Hanssens, 2010;
McAlister et al., 2007). Krasnikov et al. (2009) found that branding increase firms’ cash
flows, return on assets (ROA) and stock returns.
H2. High brand value will result in higher financial and stock market performance.

3.3 Hypothesis 3
Firms with strong brands tend to have lower financial leverage. The costs for customers
when a producer leaves the market are higher for unique products than for commodities
(Fischer and Himme, 2017). Uniqueness is an attribute of strong brands (Keller, 1993).
Firms with strong brands prefer to have more equity than debt to reduce risks during
scenarios of financial distress because of lower cash flows (Fischer and Himme, 2017). For
debt-intensive firms, interest payments account for a large portion of cash outflow. Higher
level of financial leverage reduces the flexibility of management. Firms with strong brands
are more attractive to investors as these firms are expected to provide larger returns to
shareholders (Barth et al., 1998). Finance theory suggests that firms with relatively more
tangible assets have more financial leverage as these assets can act as collateral (Titman
and Wessels, 1988). Firms with intangible intensive assets such as brands tend to have
lower financial leverage.
H3. Brand value and leverage are negatively related.

4. Methodology
4.1 Modeling and variable selection
Investment in advertising and R&D improves the customer brand equity (brand value). The
improved brand image leads to more cash flow and access to greater financial resources.
Improved cash flows will facilitate firms to reduce its financial leverage and improve credit
ratings. As a result, firms are able to access capital and debt market with ease. Firms with
strong brands are better equipped in raising external finance (Blume et al., 1998; Harris and
Raviv, 1990). The revenues for banks include both interest and non-interest revenues. Non-
interest revenues consist of ancillary revenue that bank makes in supporting its services.

VOL. 24 NO. 1 2020 j MEASURING BUSINESS EXCELLENCE j PAGE 95

 Beta variable is included to signify systematic risk. Financial risk is measured by debt equity
ratio (DER).
In the model of our study shown in Figure 1, we hypothesize that increases in advertisement
intensity would lead to enhanced brand value which in turn would improve the operating
performance of the firm. Firms with strong brand value can access funds easily from equity
market than from the debt market. Firms with strong brand power are less leveraged and will
have lower operating risk as measured by systematic risk. Hence, firms with higher brand value
will have lower financial and operating risk. Firm with higher brand value tend to have higher
operating performance. Higher brand value leads into higher firm value creation in the market.

4.2 Data sources

We collected brand value data from Interbrand and financial data from Thomson Reuters
EIKON database. Interbrand data is widely used in academic research and is considered to be
highly reliable (Himme et al., 2014; Chebab et al., 2016; Johansson et al., 2012). Similarly, the
financial data for the study drawn from Thomson Reuters EIKON database is also considered
to be highly reliable and used by several researchers (Tackx et al., 2017; Dzenopoljac et al.,
2017). Interbrand has been publishing the financial value of the top 100 global brands since
1992. We obtained these data from the website of the Interbrand Group (www.interbrand.
com). Interbrand follows certain criteria for inclusion in the best companies list. One of the
main criteria is that at least 30 per cent of brand revenues must be accounted from
overseas. The brand must be well established in developed markets of Europe and North
America and must have significant presence in Asian and emerging markets. The brand is
expected to generate economic profit in the long run. The three key components of its
valuation are financial performance analysis, role of brand in purchase decisions and
brands’ competitive strength. Table II shows the list of Interbrand’s top ten brands for the
year 2017. The list of brands included in the study is given in Appendix 1. Privately-owned
firms which were not listed in the stock market were not included in the study.

4.3 Simultaneous equation system

In a system like ours, there are possibilities of multiple causations among different variables
used in the system. Some independent variables are not truly independent and there is a
possibility of biased estimation and inconsistent results. Hence a dynamic simultaneous
equation model is used using instrumental variable (IV) method, which takes into account the

Figure 1 Conceptual model of the study

Operating
Performance

Advertisement Brand Value Firm Value

Risk

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 Table II Top ten brands in 2017
Rank Brand Sector Brand value in million dollars

1 Apple Technology 184,154

2 Google Technology 141,703
3 Microsoft Technology 79,999
4 Coca-Cola Beverages 69,733
5 Amazon Retail 64,796
6 Samsung Technology 56,249
7 Toyota Automotive 50,291
8 Facebook Technology 48,188
9 Mercedes-Benz Automotive 47,829
10 IBM Business services 46,829

information of all the equations in the system while estimating the equations. IVs consist of a set
of variables known as instruments. These IVs are basically correlated with explanatory variables
in the equation and uncorrelated with the disturbances. The function of these instruments
involves the elimination of the correlation between right-hand side variables and the disturbances.
In the two-stage least square (TSLS) estimator, the independent variables are first estimated
using the IVs and then the estimated values of independent variables are used to estimate the
values of dependent variables. Following the literature, the study used control variables for this
study such as size (Ln total assets and Ln sales), R&D, debt and profit margins.
The TSLS method used in this study is a special case of IVs regression. A fundamental
assumption of ordinary least square (OLS) regression analysis is that the independent
variables are uncorrelated with the disturbance term. If this assumption is violated, OLS
method gives biased and inconsistent results. To get an unbiased and consistent estimate,
this study used TSLS by selecting a set of variables (instruments), that are correlated with the
independent variables in the equation and uncorrelated with the disturbances. These
instruments are used to eliminate the correlation between independent variables and the
disturbances. This is done in two stages: the first stage estimates an OLS regression of each
variable in the model on the set of instruments. The second stage is a regression of the original
equation, with all of the variables replaced by the estimated (fitted) values from the first-stage
regressions. Both the stages can be done simultaneously using EVIEWS software.
The paper examines the relationship between advertisement, brand value and firm value. The
IV for advertisement intensity was represented by advertising expenditure/sales. We examine
the overall impact of marketing capability on brand value. Marketing actions such as
advertisement spending increases brand awareness and results in strong brand associations.
Advertising can make positive brand evaluations and attitudes which would result in stronger
brands with higher value. Several studies have documented positive relationship between
advertising, brand equity and market capitalization of firms (Aaker and Jacobson, 2001; Barth
et al., 1998; Malshe and Agarwal, 2015). Firm-specific factors such as advertising have a
positive impact on firm value (Erickson and Jacobson, 1992). Competitive advertising has an
impact on stock price (Fosfuri and Giarratana, 2009). Joshi and Hanssens (2010) find that
advertising spending have a positive, long-term impact on firm’s stock prices:

Advit ¼ ait þ a1 Advit1 þ a2 NProfit marginit1 þ a3 TAit þ a4 BVit1 þ a5 SEit1

þ a6 EVSit þ a7 Insalesit þ a8 R&Dit þ eit (1)

With ait ¼ al þ vt

BVit ¼ bit þ b1 BVit1 þ b2 ADVit þ b3 TAit þ b4 OpMarginit þ b5 R&Dit þ b6 DERit

þ b7 ROAit þ b8 ROEit þ b9 Debtit þ g it (2)

VOL. 24 NO. 1 2020 j MEASURING BUSINESS EXCELLENCE j PAGE 97

 With bit ¼ bl þ #t

DERit ¼ u it þ u 1 DERit1 þ u BVit þ u 3 Betait þ u 4 TAit þ u 5 R&Dit þ u 6 EBITit

þ u 7 GrossMarginit þ d it (3)

With u it ¼ u l þ e t

ROEit ¼ m it þ m 1 BVit1 þ m 2 ADVit þ m 3 EVSit þ m 4 MARCAPit þ m 5 lnSalesit

þ m 6 OPMarginit þ m 7 NProfitMarginit þ w it (4)

With m it ¼ m l þ v t

ROAit ¼ s it þ s 1 BVit1 þ s 2 ADVit þ s 3 EVSit þ s 4 MARCAPit þ s 5 lnSalesit

þ s 6 OPMarginit þ m 7 NProfitMarginit þ t it (5)

With s it ¼ s l þ p t

EVSit ¼ r it þ r 1 BVit1 þ r 2 NProfitMarginit þ r 3 ROEit þ r 4 DERit þ r 5 Betait

þ s 6 ADVit þ v it (6)

With r it ¼ r l þ g t
Where, vt and eit in equation (1) represent composite error term. This error term
includes two components. The first one represents cross-sectional error term whereas
the second one represents the combination of both cross-sectional and time series
error term. The same can be interpreted in other equations as well. The assumption of
this model is that the cross-sectional error components are not correlated among
themselves and there is no auto correlation across cross-sectional and time series error
components. The intercept ai signifies the mean of cross-sectional intercepts and the
error term vt is nothing but how much the individual intercept randomly deviates from
this mean value which is latent variable. The models are estimated using random
effects model as we assumed that that error components and independent variables
are uncorrelated.
An unbalanced panel data is estimated using TSLS method using a list of instruments used in the
system. The results of cross-section random effect results are presented in the following section.
The details of the data description are presented in Table III. For advertising intensity
equation, sales variable is considered as a factor as advertising budgets are prepared
using sales variables (Ataman et al., 2010). To reduce endogeneity issues, lagged
values of sales can be used. R&D expenditure is considered as a control variable.
Financial measures of brand equity are used to examine how brand investments lead to
financial consequences (Barth et al., 1998; Madden et al., 2006). Operating margin can be
introduced as a variable as highly-profitable firms have more brand investments. Operating
margin can have an influence on leverage. Higher cash flows signify the ability of firms to
make interest payments in relation to profits. Higher cash flows lower the operating risk of
firms. Beta is a measure of systematic risk of the firm.

5. Analysis and results

5.1 Descriptive statistics of brand value data
In the year 2017, Apple, Google, Microsoft, Coca-Cola and Amazon were recognized as the
most valuable brands. Apple’s brand value increased by 3 per cent in the year 2017
compared to the previous year. Google and Microsoft’s value increased by 3 and 6 per
cent, respectively, in the year 2017 compared to the previous year. Facebook’s brand value

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 Table III Data description
Variable Definition Expected impact Examples of prior literature support

Adv Advertisement expenses/ Positive impact on brand Kopalle and Lehman (2006), Dutta et al.
sales value profitability and firm (1999), Joshi and Hanssens (2010), Barth et al.
value (1998), Malshe and Agarwal (2015)
TA Log of total assets: control Rego et al. (2009), Barth et al. (1998), Himme
variable et al. (2014)
SE Selling expenses scaled by
sales
BV Brand value/sales Positive impact on Mizik and Jacobson (2004), Bharadwaj et al.
shareholder wealth (2011), Rego et al. (2009), Bahadir et al. (2008)
EVS Enterprise value/sales High brand value lead to
Enterprise value = market higher firm value
capitalization þ book value of
debt  cash
Lnsales Natural log of sales. Measure Joshi and Hanssens (2010), Barth et al. (1998)
of size: control variable
R&D Research and development/ Positive impact on firm value Chan et al. (2001), Pauwels et al. (2004)
sales: strategic and control
variable
EBIT Normalized EBIT/sales Higher brand value lead to Bharadwaj et al. (2011)
increases in cash flows
GrossMargin EBITDA/sales. EBITDA Strong brands will have higher Barth et al. (1998), Fischer and Himme (2017)
(earnings before interest, tax, cash flows and gross margins
depreciation and
amortization)
OpMargin Operating income/sales. This Strong brands will have higher Blume et al. (1998), Himme et al. (2014), Barth
variable reflects operating cash flows and operating et al. (1998)
margin margins
NProfitmargin Net profit/sales Firms with higher brand values
will have higher cash flows
and net profit margin
ROE Return on equity. Net income/ Profitable firms will have
equity higher brand value
ROA Return on assets. Net income/ Profitable firms will have
total assets higher brand value
MARCAP Market capitalization/sales Higher brand value leads to Joshi and Hanssens (2010)
higher stock market valuation
DER Debt to equity ratio (financial Higher brand value improves Muller (1999), Jackson (1996), Fischer and
leverage ratio) financial leverage which Himme (2017)
facilitates firms to secure long
term debt from financial
institutions
Debt Total debt/assets (financial Higher the debt ratio, higher is Fischer and Himme (2017)
leverage ratio) the financial risk of firms
Beta Beta as measure of systematic Arguments for both positive Negative relationship – Rego et al. (2009), Raju
risk and negative relationships et al. (2009), Johansson et al. (2012), McAlister
between brand value and beta et al. (2007), Srinivasan and Hanssens (2009).
exist Positive relationship – Bharadwaj et al. (2011)

increased by 48 per cent in the year 2017. Amazon’s value increased by 29 per cent in the
same period compared to the previous year. The top ten brands constituted approximately
42 per cent of the total value of the 100 brands. The total brand value of 100 brands
amounted to $1884.69bn in the year 2017.
The sector-wise brand value for the year 2017 is presented in Table IV. Automotive,
technology and financial services sectors constituted 16, 15 and 12 per cent of the top 100
brands. In. terms of highest brand values sector wise, technology sector had brand value of
$675.239bn followed by automotive sector and financial service sector with brand values of

VOL. 24 NO. 1 2020 j MEASURING BUSINESS EXCELLENCE j PAGE 99

 Table IV Sectoral value performance of top 100 brands in year 2017
Brand value ($ million)
Sector No. of companies Total Average

Automotive 16 266,827 16,676.7

Technology 15 675,239 45,015.9
Financial services 12 121,145 10,095.4
FMCG 9 95,702 10,633.6
Luxury 8 74,477 9,309.6
Alcohol 7 43,363 6,194.7
Diversified 5 72,788 14,557.6
Media 4 58,875 14,718.8
Electronics 4 35,764 8,941.0
Beverages 4 107,727 26,931.8
Retail 3 96,492 32,164.0
Restaurants 3 55,550 18,516.7
Logistics 3 28,357 9,452.3
Sporting goods 2 36,237 18,118.5
Business services 2 59,300 29,650.0
Apparel 2 39,061 19,530.5
Energy 1 17,787 17,787.0

$266.827bn and $121.145bn, respectively. In 2017, beverages sector had brand value
of $107.72bn. In terms of average brand values, technology, retail and business services
were the top sectors.
The total brand value of Interbrand’s top 100 brands for the time period 2013-17 is provided
in Table V. The average increase in brand value was 5.6 per cent during the period 2014-
2017. The brand equity value of top 100 brands increased from $1500.559bn in the year
2013 to $1871.727bn in the year 2017.
Table VI presents the mean and median statistics for top 100 brands. The mean and
median values of top 100 brands have increased over the five-year period of analysis. The
mean brand value of top 100 brands has increased from $15.006bn in the year 2013 to
$18.717bn in 2017.The median brand value increased from $7.8bn in 2013 to $9.976bn in
2017.

Table V Interbrand brand equity value for top 100 brands

Year Total brand value in million dollars

2013 1,500.559
2014 1,600.376
2015 1,714.631
2016 1,796.387
2017 1,871.727

Table VI Brand value statistics of 100 top brands during 2013-2017

Year Mean Median SD Maximum Minimum

2013 15,006 7,800 18,194.49 98,316 3,920

2014 16,004 8,210 19,890.53 118,863 4,103
2015 17,146 8,757 23,500.46 170,276 4,114
2016 17,964 9,533 24,744.59 178,119 4,011
2017 18,717 9,976 26,001.17 184,154 4,004

PAGE 100 j MEASURING BUSINESS EXCELLENCE j VOL. 24 NO. 1 2020

5.2 Descriptive statistics of other financial and marketing variables
The data for other financial and marketing variables for the time period 2013-17 was
gathered from Thomson Reuters EIKON database. The descriptive statistics of the
financial and marketing variables used for the study are given in Table VII. The median
operating margin was 15 per cent for the sample group. The median debt to equity ratio
was 0.25 and the long term debt to sales ratio was 0. 265. The median cash flow
variables of EBITDA to sales and EBIT to sales was 0.21 and 0.516, respectively. The
median performance variables of ROA and return on equity (ROE) had values of 6.65 and
15.85, respectively.
In Table VIII, the univariate analysis was done on the basis of industry sector. Altogether,
the sample firms represented 15 different industry sectors. Diversified sector had the
highest operating margin of 31.49 followed by beverage sector. In terms of average
advertisement intensity, technology sector had the highest advertisement intensity.
Technology sector also had the highest ROA ratio.

5.3 Estimation results

The correlation matrix of all the variables used in the study is presented in Appendix 2.
Table IX provides the estimation results for equations (1) and (2). R2 value is 0.92 for
the first equation results. Equation (1) results show that the level of advertising
resources in the previous period increases the advertisement amount spend in the next
year. The result shows that advertisement intensity is mostly determined by its lag. It
means that advertisement intensity is determined by what the company has spent in the
last year.
Similarly, the brand value is also determined by the lag of itself. In the second equation, the
brand value is positively related to lagged brand value with statistical significance. Stronger
brands have the capability to resist the competition and have abundant consumer loyalty
toward the brand (McAlister et al., 2007). The higher brand value which results from
awareness reduces the customer search costs and facilitates repurchase intentions.
Hence, the brand value tends to increase.
Table X shows the results of equations (3), (4) and (5). The equation (3) regression results
show that the financial leverage variable DER is positively related to asset size. Firms with
large tangible asset sizes offer scope for increased collaterals for borrowing. Hence, firms
with high tangible assets tend to be highly leveraged. The regression equation (4) results
suggest that firms with high R&D intensity would have higher operating performance. The
study shows positive relationship between value and operating performance.
Table XI shows the regression results of equation (6). The equation (6) regression results
establish the positive relationship between brand and enterprise value. Brand value is
positively related to enterprise value with statistical significance at 10 per cent (t value =
2.982) Firms with higher brand values create more value for firms in terms of operating
performance and stock market wealth creation. Firms with higher risk (both financial and
systematic risk) tend to create more value. Higher the financial risk, greater is the value
creation for firms. Firms with higher debt intensity are able to create more value. The
financial risk variable DER is positively related to enterprise value multiple with statistical
significance (t = 2.499) at 5 per cent. Firms with higher systematic risk tend to have more
value creation. The systematic risk variable of beta is positively related to value creation with
statistical significance at all levels (t = 1.68).
This study documents the positive relationship between brand value and firm value
consistent with studies (Mizik and Jacobson, 2004; Bharadwaj et al., 2011; Rego et al.,
2009; Bahadir et al., 2008). The relationship between advertisement intensity and brand
value is not established. Higher R&D intensity leads to higher profitability for firms.

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 PAGE 102
Table VII Descriptive statistics of the whole sample

j MEASURING BUSINESS EXCELLENCE j VOL. 24 NO. 1 2020

Mean Median Maximum Minimum SD Skewness Kurtosis Jarque-Bera Observations

Operating margin (%) 271.8 15.06 140200 125.778 5988.38 23.35 545.99 6782013.0 548
Adv sales ratio 3.986 0.052 436 0.001 40.30 10.66 114.81 63158.19 117
BV sales ratio 0.000011 0.0000005 0.004 8.13E-11 0.00021 20.94 439.70 3544516.0 442
BV per share 11911.2 18.035 1331779 2.69 105430.30 9.95 105.15 266271.70 590
Cash sales ratio 2.426 0.112 648 0 35.23 16.41 277.98 1568946.0 491
Change BV% 0.068 0.060 1.29 0.24 0.13 2.96 25.23 10690.43 485
DER 0.247 0.250 9.293 132.56 7.04 15.31 266.66 1614582.0 550
Dividend yield% 2.44% 2.27% 10.8 0 1.43318 1.64 8.66 899.3 503
EBITDA/sales 2.263 0.217 1031 1.158 44.58 23.03 531.81 6281027.0 535
EBIT/sales 16.003 0.156 7453 1.25 324.61 22.55 516.10 5925039.0 536
Long-term debt to sales ratio 2.481 0.265 997 0 43.13 22.98 530.30 6245060.0 535
RD/sales 0.067 0.045 1.023 0.0022 0.09 6.01 57.77 53180.78 406
Selling expense/sales 2.538 0.248 1122 0.031 48.71 22.93 527.55 6134381.0 531
ROA 7.103 6.65 35.02 61.21 8.21 2.40 22.96 10187.00 580
ROE 20.47 15.85 327.18 227.22 30.66 3.20 45.11 43470.33 575
Total assets/sales 63.092 1.58 28365 0.41 1235.19 22.49 514.45 5909112.0 538
Total revenue/sales 6.83 1.000 2991 1 128.61 23.16 537.86 6497022.0 541
 Table VIII Industry wise descriptive mean statistics
Operating Advt Book value Cash sales Change EBITDA/ EBIT/ LT debt to SELLING TASSET/ Net profit
Industry margin (%) sales BV sales ratio per share ratio BV (%) DER Div yield sales sales sales RD/sales EXP/sales ROA ROE sales margin (%)

Alcohol 27.40 0.02 0.0000001 13.20 0.04 0.04 1.57 2.20 0.25 0.21 0.72 0.01 0.19 9.80 26.27 2.12 16.00
Luxury 1.32 0.000000002 44.60 0.07 0.02 0.24 2.04 0.10 0.06 0.17 0.03 0.09 8.16 16.34 1.07 12.66
Automotive 18.36 0.06 0.000000896 4922.50 0.15 0.07 1.42 2.33 0.23 0.19 0.39 0.01 0.32 1.25 13.62 1.44 1761.17
Beverages 16.50 0.02 0.000000628 9.23 0.12 0.03 0.84 2.91 0.23 0.19 0.23 0.05 0.19 10.62 32.03 1.07 15.07
FMCG 12.50 0.00 0.000000252 18.32 0.30 0.04 0.23 2.53 0.17 0.12 1.06 0.04 0.13 9.43 28.25 2.87 10.21
Business services 3.96 0.04 0.000000001 12.83 0.14 0.02 0.24 2.39 0.10 0.04 0.09 0.07 0.17 15.70 70.12 1.36 12.54
Diversified 31.49 0.000000368 23.35 0.99 0.04 1.84 2.82 0.34 0.30 4.94 0.03 0.24 5.81 22.31 35.79 8.46
Electronics 15.80 0.10 0.00000025 1822.62 0.05 0.00 0.02 1.99 0.20 0.17 0.18 0.02 0.32 1.09 0.51 1.47 0.99
Oil 19.40 0.000000835 25.38 0.04 0.06 0.20 5.76 0.24 0.20 0.15 0.00 0.45 4.88 10.16 1.77 4.01
Financial services 13.50 0.00 0.000000905 44.63 0.08 0.06 2.83 2.77 0.30 0.20 0.33 0.02 0.18 4.15 14.24 1.86 16.27
Media 6.01 0.000000015 15.81 0.02 0.01 0.19 2.47 0.11 0.06 0.11 0.01 0.04 6.31 15.57 0.94 8.30
Restaurants 21.60 0.000000851 275.21 0.11 0.04 0.11 2.07 0.25 0.19 0.36 0.01 0.16 10.79 28.40 1.11 12.08
Retail 13.00 0.000000528 17.35 0.17 0.19 0.44 NA 0.10 0.04 0.13 0.10 0.20 7.00 14.98 0.87 13.94
Sporting goods 10.10 0.12 0.000000348 16.08 0.11 0.07 0.16 1.40 0.13 0.11 0.06 0.01 0.25 10.53 18.84 0.74 7.39
Technology 21.60 0.23 0.000000003 66191.33 0.11 0.15 0.32 2.11 0.19 0.11 0.01 0.06 0.08 10.17 17.92 0.86 15.75

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j MEASURING BUSINESS EXCELLENCE j PAGE 103
 Table IX Regression results I
Equation (1) Equation (2)
Adv intensity brand value
Variables Coefficient t-stats Coefficient t-stats

C 0.177 0.70 1.49 1.42

ADVit–1 1.12 6.11
ADVit 15.66 1.68
BVit1 2.76 5.56
BVit 0.0002 0.39
TAit 0.0007 0.398 0.58 0.26
EVSit 0.000005 0.05
LnSalesit 0.0006 0.0009
R&Dit 0.01 0.571 6.70 0.885
Net profitit 0.000005 0.84
Selling expit 0.011 0.422
Op incomeit 1.12 0.133
DERit 0.001 0.053
ROAit
ROEit 0.089 1.24
Debtit 1.24 0.30
Cross section included 66 66
Unbalanced panel obs 442 442
R2 0.92 0.03
DW stats 1.52 0.99
F Stats 1.82 9.92
Notes:  p < 0.01 level;  p <0.05 level;  p < 0.10 level

Table X Regression results II

Equation (3) DER Equation (4) ROE Equation (5) ROA
Variables Coefficient t-stats Coefficient t-stats Coefficient t-stats

C 0.17 0.17 15.49 0.49 165.99 1.07

Brandit 0.01 0.10
Brand(it1) 1.68 1.30 7.81 1.43
EBITit 2.86 1.00
BETAit 0.608 0.70
Assestsit 0.28 2.45
R&Dit 7.00 1.31 27.22 1.79 68.955 0.70
GROSSMARGINit 0.01 0.977
ADVit 176.70 0.97 153.32 0.18
EVSit 0.973 3.18 0.20 0.16
MARCAPit 0.25 1.21 0.18 0.18
Ln Salesit 0.45 0.39 6.49 1.09
Op Marginit 0.062 0.35 0.167 0.25
NProfMarginit 0.63 3.10 1.27 1.85
Cross section included 66 66 66
Unbalanced panel obs 454 442 442
R2 0.019 0.72 0.22
DW stats 1.90 0.34 0.53
F Stats 1.81 83.19 15.25
Notes:  p < 0.01 level;  p <0.05 level;  p < 0.10 level

6. Implications and conclusion

6.1 Managerial implications
All decisions taken by managers must ultimately result in wealth creation for shareholders.
In the modern corporate world, marketing decisions are of paramount importance for
shareholder value maximization. This study explores the long- term relationship between

PAGE 104 j MEASURING BUSINESS EXCELLENCE j VOL. 24 NO. 1 2020

 Table XI Regression results III
Equation (6) EVS
Variables Coefficient t-stats

C 0.87 0.64
BRANDVALUE1 2.01 2.98
NETPROFITMARGIN 0.004 0.19
ROE 0.006 0.17
DER 1.22 2.50
BETA 1.88 1.68
ADV_SALE 4.404 0.34
Cross section included 67
Unbalanced panel obs 507
R2 0.99
DW stats 1.52
F Stats 22230
Notes:  p < 0.01 level;  p <0.05 level;  p < 0.10 level

marketing actions such as advertising spending, brand value and firm value creation. The
study focusses on the influence of advertising in creating brand value which in turn
examines the brand value effects on both operating performance and market value of firms.
The study uses the methodology of simultaneous equation regression to examine the
advertising effects on brand value and value creation using a sample of the top 75 brands
ranked by Interbrand. Strong brands send a strong signal of creditworthiness to investors.
The impact of brand value on value creation for firms is of relevance to managers, investors
and marketing research. Managers should focus on disclosure of information on marketing
metrics such as brand value which could elicit better responses from investors and results
in value creation in stock markets. Brand quality should be measured and disclosed in
annual reports and filed with respective securities agencies. Marketing authorities ought to
develop industry benchmarks and standards to measure marketing metrics such as brand
equity and promote steps for its adoption by financial stakeholders. Marketing managers’
strategies for creation of brand equity investments have a significant impact on firm’s worth
as reflected by its market performance. This study provides ample evidence for marketing
managers to highlight the importance of worthy investments in brand equity to financial
managers as necessary for enhancing financial performance.

6.2 Theoretical implications

The empirical results suggest that advertisement intensity is determined by its lag variable.
Firms which have higher advertisement expenditure continue to spend in similar magnitude
in the following years. Firms with built up brand values continue to have higher brand values
in the following years. The implication would be that the higher brand value acts as catalyst
for repeat purchases. Debt-intensive firms are found to have high tangible asset intensity.
The presence of tangible assets would provide good collaterals for firms to borrow. Firms
which have high R&D intensity show superior operating performance. Higher the brand
value, greater is the value creation for firms. Riskier firms both in terms of operating and
financial risk will have more value.
Firms with high intangible asset such as brands are riskier on account of its unique product
characteristics and uncertain cash flows. Contrary to existing studies, this study finds that
firms with strong brand values have higher debt component in its capital structure.
Current studies on impact of marketing actions on value creation have focused on variables
such as stock returns (Joshi and Hanssens, 2010; Bharadwaj et al., 2011) and market
capitalization (Barth et al., 1998). There exists a gap in studies which examines the role of
marketing decisions on value creation which jointly impacts both operating and stock

VOL. 24 NO. 1 2020 j MEASURING BUSINESS EXCELLENCE j PAGE 105

 market performance. We examine value creation for firms by choosing a representative
variable which signify joint impact on both operating and stock market performance. The
valuation variable of enterprise value to sales represents both operating and market
performance of the firm.
There exists a strong linkage between marketing and finance objectives. The study
establishes the positive relationship between brand and firm value. The study contributes to
the research streams in the marketing strategy and financial outcomes. Our study
contributes toward fundamental explanatory mechanism regarding brand investments and
its financial implications. The study finds that brand quality enhances shareholder wealth.
Brand equity is not accounted in a firm’s financial statement as an asset. At the same time,
investors understand the pivotal role of brand equity in terms of its ability to attract and
retain customers. Investors’ perception of brand strength is the key determinant of financial
valuation of firm through the lens of stock market performance.
The idea that greater promotion of brands leads to higher profitability and value creation is a
belief that firmly rooted theoretically and conceptually in marketing literature. Through a
combination of econometric and financial modeling, this study highlights the potential value
of dynamic simultaneous equation model techniques in providing insights into the role of
brands in determining financial and stock market performance. The study highlights the
importance of examining both the risk and the returns implications of marketing metrics.
Increase of systematic risk implies that stock returns expected by investors also increase as
systematic risk is a key determinant of returns expected by investors and analysts. The
major challenge for managers is to derive the benefits of brand quality without increasing
the systematic risk of the firm. From marketing theory perspective, the study highlights the
risk and return implications of marketing metrics

6.3 Future research

In conclusion, the study finds evidence to suggest that higher brand values lead to
improved performance in terms of value creation. The study is of managerial importance as
the focus on improvement of intangible asset quality would lead to higher brand values
which in turn would positively impact wealth creation for the firms. Increased brand value
signifies the strong financial position of the firm. The study could be extended to other
market based asset models. Feedback loops which extend from stock market reactions can
be included in future studies. This study did not capture the sectoral differences in these
models; the future research in the area can explore this aspect. This study found no
significant effect for the association between some of the variables, specifically, the
connection between advertisement and brand value which could be part of future study
could be investigated in a different data set.

Notes
1. Ambler T. (1992) “Need-to-Know Marketing”, Century Business, London.
2. Jones C. and Boneviac D. (2013), “An evolved definition of brand”, Journal of Brand Strategy, Vol 2
No 2, pp. 12-120.
3. www.cim.co.uk/mediastore/Brand_eGuides/eGuide7.pdf

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 Appendix 1

Table AI List of sample firms

S.No Company Industry

1 Anheuser-Busch InBev Alcohol

2 Brown-Forman Alcohol
Corporation
3 Heineken Holding N.V Alcohol
4 Diageo plc (D) Alcohol
5 Louis Vuitton Luxury
6 Toyota Motor Corporation Automotive
7 Daimler AG Automotive
8 BMW Automotive
9 Honda Motor Corporation Automotive
10 Ford Motor Company Automotive
11 Volkswagen Automotive
12 Porsche Automobil Automotive
13 Kia Motors Corp Automotive
14 Harley Davidson Automotive
15 Ferrari NV Automotive
16 Tesla Automotive
17 Coca Cola Beverages
18 Pepsi Co Beverages
19 Nestle FMCG
20 IBM Business services
21 ACN Inc Business services
22 General Electric Diversified
23 SEIMENS Diversified
24 3M Diversified
25 Caterpillar Diversified
26 Deere & Company Diversified
27 Philips Lighting FMCG
28 Canon Electronics
29 Sony Electronics
30 Panasonic Electronics
31 Royal Dutch Shell Oil and gas
32 American Express Financial services
33 AXA SA Financial services
34 Goldman Sachs Financial services
35 Citigroup Financial services
36 HSBC Holding Financial services
37 Allianz SE Financial services
38 Morgan Stanley Financial services
39 Visa Inc Financial services
40 Banco Santander Financial services
41 MasterCard Financial services
42 PayPal Holdings Financial services
43 Procter & Gamble FMCG
44 Kellogg Company FMCG
45 L’OREAL FMCG
46 Danone FMCG
47 Nestle FMCG
48 Colgate Palmolive FMCG
49 Tiffany & Co FMCG
50 Burberry Group FMCG
51 Prada SpA FMCG
52 Christian Dior FMCG
53 Walt Disney Company Media
(continued)

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Table AI
S.No Company Industry

54 Thomson Reuters Media

55 Netflix, Inc Media
56 Discovery Communications Restaurants
57 McDonald Corporation Restaurants
58 Starbucks Corporation Restaurants
59 KFC Restaurants
60 Amazon Retail
61 Ebay Retail
62 Nike Sporting goods
63 Adidas Sporting goods
64 Apple Technology
65 Google Technology
66 Microsoft Technology
67 Samsung Technology
68 Facebook Technology
69 Intel Corp Technology
70 Cisco Systems Technology
71 Oracle Technology
72 SAP Technology
73 Hewlett Packard Technology
74 Adobe Systems Technology
75 Salesforce.com Technology
76 Lenovo Group Technology

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 PAGE 112
Table AII Correlation matrix of all the variables used in the study
Adv Change EBITDA EBIT Longterm Selling TASSET Debt
Variables sales Beta BV Cash BV Dividend sales sales debt sales RD sales ROA ROE Exp sales sales Euity R
Appendix 2

Adv Sales 1

j MEASURING BUSINESS EXCELLENCE j VOL. 24 NO. 1 2020

Beta 0.34 1
BV 0.03 0.54 1
Cash 0.42 0.24 0.03 1
ChangeBV 0.15 0.05 0.08 0.32 1
Dividend 0.53 0.22 0.26 0.04 0.09 1
EBITDA Sales 0.25 0.14 0.56 0.55 0.41 0.08 1
EBIT Sales 0.22 0.17 0.63 0.60 0.38 0.18 0.97 1
Long-term debt sales 0.41 0.02 0.48 0.74 0.20 0.14 0.66 0.76 1
RD Sales 0.44 0.20 0.21 0.52 0.20 0.16 0.82 0.71 0.46 1
ROA 0.04 0.34 0.65 0.15 0.44 0.12 0.78 0.75 0.29 0.52 1
ROE 0.18 0.37 0.69 0.13 0.07 0.03 0.24 0.31 0.25 0.05 0.60 1
Selling Exp Sales 0.65 0.47 0.03 0.09 0.13 0.42 0.28 0.16 0.26 0.45 0.03 0.08 1
TASSET Sales 0.31 0.26 0.16 0.73 0.01 0.08 0.65 0.69 0.76 0.62 0.17 0.08 0.24 1
Debt Euity R 0.02 0.47 0.51 0.38 0.16 0.08 0.11 0.06 0.20 0.37 0.01 0.58 0.21 0.25 1
About the authors
B. Rajesh Kumar is a Professor of Finance at Institute of Management Technology, Dubai,
UAE. He received his PhD from the Indian Institute of Technology, IIT Kharagpur. His
research interest is in areas of applied corporate finance, valuation and mergers and
acquisition. He has published over 40 empirical research papers in refereed international
journals. He has written six books of which three were published by Academic Press
Elsevier USA (Strategies of Banks and other Financial Institutions; Valuation Concepts and
Theories; and Strategic Financial Management Case Book), one each by Palgrave
Macmillan UK (Case Studies on Megamergers); McGraw-Hill India (Mergers and
Acquisition: Text and Cases); and ICFAI Books (Strategies of Indian Pharma Industry).

K.S. Sujit is an Associate Professor in the area of economics at Institute of Management

Technology, Dubai, UAE. He is a PhD in economics from Hyderabad University, India. He
has 15 years of experience in academics and served various institutions located in India,
Ethiopia and Dubai. He has more than 20 research papers in different areas. Currently his
research interests are in industry analysis, macroeconomics and valuation.

Waheed Kareem Abdul is a Professor of Marketing at Institute of Management Technology,

Dubai, UAE. His research interests include brand equity, price fairness perceptions, price
promotions, branding, customer trust and buyer–seller relationship. He has published
research articles in Supply Chain Management: An International Journal, Australasian
Marketing Journal, Asia Pacific Journal of Measuring and Logistics, Journal of Revenue and
Pricing Management, International Journal of Pharmaceutical and Healthcare Marketing,
Measuring Business Excellence and Journal of Management Development. Waheed
Kareem Abdul is the corresponding author and can be contacted at: waheed@imt.ac.ae

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